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Sunday, April 16, 2017

Are The Answers to These Questions From 5 Years Ago Still Relevant?

In January of 2012 I wrote to several Modular Factory Owners and General Managers asking them to respond to three questions about our industry.

Are these questions still as important today as they were then? If not, what questions would you like me to ask them today?

Here are the questions I asked. I've kept their identities hidden.Why would a modular home manufacturer agree to a non-exclusive builder relationship and then penalize that builder for shopping other companies?Southern Factory Sales Manager:Builders have the right and should compare factories. We wouldn’t penalize a builder for doing that providing the builder doesn’t share proprietary information while doing so. We don’t ask our builders to sell our products exclusively as long as the other products they sell don’t substantially overlap us (some want a value-priced offering to reach a broader market). If a builder wants to carry two products that are similar in spec; price point, it simply becomes a race to the bottom on every deal…and that’s just a huge waste of time, money & energy. But if a builder shops around, and brings to our attention advantages that he or she liked about a competitor, it should be a way to make us sharper. So it’s ultimately a good thing.New England Factory Owner:I have no problem selling a builder who buys from another company however we will not supply the sales and lead support. Consequently, most of our builders purchase only from our company. They understand the value that we provide and are willing to make the commitment for that reason. Bottom line, our builders know we help them sell many of their customers. Mid Atlantic Factory CEO:In the current soft market, a manufacturer might agree to sell on a non-exclusive basis to retain the sales that do result. They would not think of it as penalizing the builder by being cautious with (wanting to control) leads that result from their efforts. The particulars of your example could also depend on who was the original source of the lead that you were writing about, the factory or the builder? It is more likely that the factory is thinking they do not want to reward a builder who is not loyal. Another factor would be how the manufacturer deals with builder territory exclusivity.Mid Atlantic Factory Owner:We all would like to believe that we can and do create a near franchise relationship with our customers. But the fact of the matter is that we are only as good as our last house, when we do not require exclusivity. More importantly I don’t believe that every factory can supply every single one of the needs of their customers in all cases. There are manufacturers that do a great job building the entry level products, but don’t like to venture into the light commercial or multi-family markets. There are companies that do an awesome job in the middle to high end, but cannot get down to the entry level products.

What are modular home manufacturers willing to bring to the relationship to hold the loyalty of the builder? Marketing support? Sales support? Leads?Southern Factory Sales Manager:We strongly believe that our function as a sales/marketing department is to sell “through” the builder rather than “to” the builder. I don’t believe that’s a concept many of our competitors grasp or aspire to. We live & breathe it here. It was a tough transition as we shifted funds from steak dinners to website improvements, but we rolled the dice believing that if we could provide our builders with leads and powerful tools to close those leads, they’d ultimately be more loyal because the lifeline of their business depended on our marketing assets. It has paid off considerably as we had tremendous retention rates during a difficult bankruptcy and now enjoy a backlog that is out through the end of the year despite building 40% more production per week than we did this time last year. Frankly, I’m always amazed that in an industry that only builds 2-3% of all residential construction in the country we often find ourselves so focused on the pie we’re all sharing that we often ignore the other 98% of all construction that makes up our “opportunity” for expansion for both our industry and our individual companies. Like rats fighting over crumbs when there’s a table full of food right within our grasp if we simply looked outside the boundaries of our little skirmishes.New England Factory Owner:If a builder is willing to make a 100% commitment to our company we will provide them with all the leads from the territory that we mutually agree upon. In addition, unlike many other modular companies, we participate in putting together advertising campaigns with the builder......in many cases, we develop the ads (radio, TV, Print, billboards, Internet, etc..) and we participate financially in the media campaign.......hell, we place the ads and accept billing in some cases depending on the quality of the builder. Quite frankly, we would not make this commitment to a builder who was purchasing from multiple companies since the lines get blurred and I can not advertise and provide extreme sales support such as Chief Architect training, sales training among many other things.New England Factory Owner:There seems to be a wide range in the level of support provided by different manufacturers. Our company has very low builder turnover and we provide far more support than most builders are willing to take advantage of. We provide all of the items you mention and more. However, most builders do not invest much time or money in marketing, so the sales and marketing support is under utilized, but still important, assuming some of it gets used. Sales and marketing support gets taken for granted and does not generate loyalty, other than if it generates a volume of "quality leads." Quality leads are those who end up buying. So loyalty comes, in part, from giving builders easy to close sales.I think the most important factors for loyalty are mutual trust and service, at least when dealing with quality oriented builders. There are many builders in the industry who compete purely on price. They jump from factory to factory to save 25 cents per sq ft, only to be frustrated by the lower quality that allowed the lower price that attracted them in the first place.Mid Atlantic Factory Owner:Every one of us has developed programs that we believe are there to support our builders and their efforts. Some are very, very, sophisticated some much less complex, but all have customers that use them to the extent of their abilities. The Internet has been the single largest advertising and promotional tool that has come along since I have been in the business. Sending leads to our builders generated by our internet presence has done much to gain customer loyalty as it pertains the lead(s) that’s a factory sends them. But honestly, can a builder that is suffering accept a lead from another manufacturer, when offered and remain loyal? There are some that do and will and then there are those that don’t.

I’ve often talked about a love/hate relationship between the builder and the modular home factory. Do you see this love/hate relationship when you talk to existing modular home builders, either yours or another factory's?New England Factory Owner:We run into builders with this love hate relationship.......bottom line.....when this exists, it is typically because the manufacturer has one interest and that is to have the builder call when they have an order otherwise they provide no sales support. Our success and our builders success is in large dependent upon the strong long term relationship we build based on trust and support. The builders that do not jump ship from these manufacturers are probably doing so because their primary focus is on price and how cheap they can purchase a home instead of support and providing value to their customers. Southern Factory Sales Manager:Aside from the squeezed margin impacts mentioned above, much of the discord I see between builders & factories comes from continued lack of understanding of each other’s business models. Builders rarely grasp the tremendous costs that saddle a factory operation and often over-estimate earnings. Factories rarely have people on staff that have been on the front lines in a sales/build situation. As a result, both sides have over-simplified impressions of what the other one does. We factory folks think we have some simple answers that – if applied by the builder – would fix them...and vice versa. I think factories should invite key builders, open up the statements and really show them how they are structured. Factory folks should spend time with the builders in the field, join them for customer meetings and really see how difficult it is to manage the “human element” that makes up a customer (us factory guys have hundreds of employees who generally march in step with our requirements…sometimes making it hard to envision that not all people are as easy to control…particularly customers who buy our houses).New England Factory Owner:The love/hate relationship you mention is wide spread in the modular industry. A great deal of it is caused by the low price/ low quality/ low service cycle that many low end builders and manufacturers play, as I described before. Builders and manufacturers who sell on price alone and produce low quality homes will remain stuck in the love/hate relationship. The focus on low price/ low quality is also what is holding back the industry from gaining share.There are also conflicts that come from both the builder and the manufacturer trying to control their business without understanding or caring about the needs of the other business in their supply chain. Our company rarely tries to attract existing modular builders because they usually have been trained to sell on price alone and do not approach the manufacturer relationship as the partnership it must be, nor have they developed a reputation for quality. Instead we try to convert quality stick builders to modular and train them on how we can best work together for mutual success from day one. We also try hard to understand what they are facing and keep communication open at the senior management level. Backing that up with strong and responsive service helps to greatly reduce the conflict. That is not to say we operate without any builder conflict, but when it arises we try to address it head on, find the root cause, and find a resolution. As a result we have very low builder turnover, and a growing network of Builders.Mid Atlantic Factory Owner:It is a love /hate. We both want the same things, but seem to have a contest going on to see who gets more of it. You hear all kinds of stories from all different perspectives from builders and there are some common threads.

“My manufacturer does not communicate with me enough”

“They have not given me a lead in 6 months”

“Their website is not doing the job for them, they need to change it”

“They have not developed a support system for their builders that is reflective of the times”

They don’t want to make changes to their product, specifications, marketing etc, etc…..” And the list goes on.

If you have a question you would like me to ask a group factory owners and General Managers to be published in another article, send it to modcoach@gmail.com or leave a comment.